03/02/11 Waterford, Ireland – “What went wrong?” we asked the cab driver.
“Well, they give you all kinds of nonsense reasons. But it’s pretty simple. People spent a lot more money than they should. Now, they don’t have any money left.
“They put up houses all over the place. But there was no one with the money to buy them. And then the developers went broke. And then the banks that lent them money went broke. And then the government went broke. And now we’re all broke.”
Booms go bust. Wealth disappears. Debt does not. Someone, somewhere, sometime has to pay it. If not the borrower…someone else.
The story of the bubble years was the build up of debt throughout the world.
The story of the post-bubble years has been the feds’ efforts to put the debt onto someone other than the people who borrowed it. Bailout the banks…stick the public with trillions in debt…or print up more paper money, disguise debt as inflation and spread it all over the world.
We saw how the bubble story ended. Now we will see the post-bubble story develop and eventually come to an end too. How? The debt will be repaid – by somebody.
Yesterday, stocks went down 168 points on the Dow. Gold rose $21. Is the post-bubble, post-crisis rally out of gas? Maybe… We’ll wait to find out.
Meanwhile… We turn to the grand tableau of history. The story of booms, busts, revolutions, wars…all the things that go wrong in man’s collective life.
(Private acts of charity, beauty, and courage do not make the history books.)
What will the history books of the future say? How will they describe us…our time…and what went wrong?
We believe they will tell how three groups brought down the US Empire:
1) The feds
2) The banks
3) The neo-cons
The feds destroyed the empire’s economy and corrupted its political institutions.
The banks (including the central bank) destroyed the empire’s finances, and its money.
And the neo-cons undermined the integrity of its military, with their expensive mock wars.
All of them worked together to twist the system into a grotesque new shape…and populate it with a race of zombies.
And they’re still at it…
The feds are spending $4 billion more PER DAY than they take in via tax collection. In addition, they’re printing up $3 billion more PER DAY just to help make ends meet.
Where does all that money go?
Well, here’s a report from The Wall Street Journal:
The US government has 15 different agencies overseeing food-safety laws, more than 20 separate programs to help the homeless and 80 programs for economic development.
These are a few of the findings in a massive study of overlapping and duplicative programs that cost taxpayers billions of dollars each year, according to the Government Accountability Office.
The GAO examined numerous federal agencies, including the departments of defense, agriculture and housing and urban development, and pointed to instances where different arms of the government should be coordinating or consolidating efforts to save taxpayers’ money.
The agency found 82 federal programs to improve teacher quality; 80 to help disadvantaged people with transportation; 47 for job training and employment; and 56 to help people understand finances, according to a draft of the report reviewed by The Wall Street Journal.
Naïve readers will think to themselves:
“How could the government do such stupid things?”
But that just goes to show how little they understand government.
Government labors to improve the quality of our lives. That’s the line used by both major parties. It’s what most people are taught in school. Even as adults, incredibly, they still believe it.
As reported above, in the WSJ, the feds have set up 82 separate programs to improve the quality of teaching in our schools. Guess they’re serious about education, right? But you don’t really think bureaucrats could improve the quality of teaching, do you? Of course not. What do they know about teaching?
Or agriculture? Or selling stocks? Or banking? Or anything else? What improvements have bureaucrats ever made? Name one! Who invented indoor plumbing? Who invented the repeating rifle or rolled the first cigarette? Who created Facebook?
Bureaucrats do not create wealth. They transfer it. From the people who earned it, to themselves and other zombies. Efficiency has nothing to do with it. The more programs the better. The more inefficient the better. The more zombies…the more voters to back their larceny.
And what about the banks? After nearly bankrupting the system, the bankers are still in business too. They take the feds’ money and lend it back to the feds for a cool 3% or 4% difference. Free money. You can’t beat that. And 3% of this year’s budget deficit alone is $45 billion. Not bad for government work.
The bankers are self-serving enablers, helping the feds bankrupt the empire. And making money for themselves in the process.
And don’t forget the neo-cons. They’re doing their part to discredit America’s military…sully the empire’s reputation…and waste its resources. Iraq, Afghanistan…and now they want to invade Libya!
But we don’t blame any of them. They’re only doing what comes naturally. Destiny requires that every great Empire ruin itself. They’re just playing their parts…
Regards,
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Bill…you rule. I would like to buy you a beer next time you are in Philly.
Most folks I know are not concerned with the death of the empire as long as they have adequate supplies of beer nuts, cheez curls, hohos and plenty of reality TV and ESPN to watch. As the Titanic slips slowly beneath the waves, the crew busies themselves rearranging the deck chairs…..
Bill said:
Booms go bust. Wealth disappears. Debt does not
Yes, wealth dissappears from the point of view of the individuals who owned it.
But from the point of view of the world as a whole most wealth does not disappear. The Irish houses are still there. It’s just that now they may have new owners. And the amount of stuff like food or green beer that a house can be traded for has declined.
But the real wealth being the amount of beer and cheese and houses and all that has not declined…
Money is not the real wealth. Money is the paper we use to easily barter the real wealth.
Please… Shawn…
I’m begging you…how many times do I have to ask?
It’s not that the people aren’t interested in the tiny nuggets of non-wisdom that you have to share, it’s just that I don’t have the same feelings for you that I once did.
It’s not you, it’s me.
I’ve tried to make our parting as easy as possible. For your own sake, it’s time to move on and find someone new to pore over Berkshire financials with and trade autographed Warren Buffett photos.
B
Mr. Bonner is by far the best in the whole net.
Mr. Common Sense himself. Reading his articels much like getting a sip of fresh air.
How you do speak in english “budget ausschöpfen”? Spoon out the budget? By th way ther is a lot to spoon out by invading Lybia!
The strongest force in the world isn`t gravity: it is corruption!
…for all the money and services provided to and for the recipients of “hand-outs” by the FED, bankers and politicians, don’t you find it odd that 5% of the american people own 813% of the wealth there…it sounds to me like most americans subsist on “hush” money…is “credit”money any less ridiculous than electricity…
The Investor’s Friend: Get a life.
you may want to consider adding fox news to the list
Bill:
Great post, better comment!
“What will the history books of the future say? How will they describe us…our time…and what went wrong?
We believe they will tell how three groups brought down the US Empire:
1) The feds
2) The banks
3) The neo-cons”
Unfortunately, I don’t believe the history books will tell the truth. I can’t image the groups that caused the crisis will allow our schools to teach the real reason for the economic crisis.
shawn! don’t ever leave!
if BBB wants to nuke you, let him do it way before the “comments”–like in his article!
The Irish houses are still there. They were built on borrowed $. The bank only rec.s a portion of the $ back, but the houses are trashed and in need of repair. Now the bank has to sell for less than what is owed. Is that wealth not destroyed?
Phelps, yes if the houses are trashed that is definitely wealth destroyed.
But I saw no evidence that the houses were trashed. Anyway, Bill talked about the case where a loan is defaulted on as destroyed wealth.
A defaulted loan is a transfer of wealth it does not destroy wealth.It does destroy a person’s wealth, but from the point of view of the world as a whole it is just a transfer of wealth.
Wealth is measured in money. Money is wealth only in the sense it can be traded for goods and services.
My point is that it is the goods and services that are the actual wealth. Money is just a way to efficently barter goods and services. And to keep score of wealth.
P.S. Some of those groupies of mine are starting to creep me out.
Now you know how I feel, Shawn.
B
never, ever leave, shawn. bill and i need you more than we dare say.
s’pose that on Thursday, mar. 3, “The Market Index” closes @ 1,000. Marked-to-market, we have a capital structure valued @ $100 Tril.
The next day, Friday, mar. 4, is a bit “black” and the index closes @ 200, and we now have a capital structure valued @ $20 Tril.
Where did the $80 Tril. “go”, brucie? you may well choose to argue that no ‘wealth’ was destroyed by this since you still have yer 3 silver spoons.
However, what would you say to the proposition that $80 Tril. of CAPITAL was Wiped Out in a deflationary collapse on Black Friday?
huh?
Bill: sir, if bruce leaves, i daresay we might both understand what ayn rand went thru when greenspan finally found a job.
Don’t you think this doom and gloom attitude is more damaging than anything? I’m not saying people didn’t screw up, but, seriously… death of the US empire? Research is showing that, while the circumstances are not the worse the country has ever faced, the attitudes and feelings of resilience are some of the lowest. Too bad you contribute to this. Maybe you should offer creative solutions instead of simply offering blame.